I'm trying to deal with this at the moment too. I'm in Australia. Australia does have a tax treaty with the U.S. which means the income is not supposed to be double-taxed. So I have the choice of registering for an ITIN (and Amazon etc. will still withhold 5% for Australian's anyway - maybe it's because we were once a convict colony), OR I can just let them withhold the full 30% and show it on my tax return at the end of the year, in which case (if I understood my accountant properly), the withheld amount shows as tax already paid and so it should all come out in the wash (so to speak).

The other side of all that is that, in Australia, income from hobbies are not (in certain circumstances) taxable (and so the expenses are not deductible). So while the income remains small it may have been feasible not to declare it ... except for this aspect of Amazon (and Smashwords etc.) withholding tax and making life complicated again.

See the recent "BookBaby experiences" thread for discussion there about the fact that BookBaby does not withhold tax or require an ITIN (but they do require that you pay for their services).